Canada: CPI February 2016

The Consumer Price Index (CPI) rose 1.4% in the 12 months to February, after increasing 2.0% in January.

Excluding gasoline, the CPI rose 1.9% year over year in February, following a 2.0% increase the previous month.

Gasoline prices were down 13.1% year over year in February, contributing the most to the overall deceleration in consumer prices. The gasoline index had increased 2.1% on a year-over-year basis in January. On a monthly basis, gasoline prices were down 6.9% in February 2016, while they had increased 9.4% in February 2015.

12-month change in major components

Prices rose in six of the eight major components on a year-over-year basis in February, with the food and shelter indexes contributing the most to the rise in the CPI. The transportation index, which includes gasoline, and the clothing and footwear index declined on a year-over-year basis in February.

Consumers paid 3.9% more for food in February compared with the same month a year earlier, with prices for food purchased from stores increasing 4.4% in the 12 months to February. On a year-over-year basis, higher prices for fresh vegetables and fresh fruit contributed the most to the rise in food prices. On a monthly basis, prices for fresh vegetables and fresh fruit were down in the Western provinces, while they increased in the rest of Canada. On a year-over-year basis, the meat index (+1.6%) recorded its smallest gain since January 2014. Prices for food purchased from restaurants rose 2.7% year over year in February, following a 2.5% increase the previous month.

The household operations, furnishings and equipment index rose 1.8% in the 12 months to February. The telephone services index was down less on a year-over-year basis in February (-0.4%) than in January (-2.5%); the index was up 2.1% on a monthly basis. On a year-over-year basis, the Internet access services index increased 0.9% in February, after rising 4.9% the previous month.

The transportation index decreased 0.5% year over year in February, following a 2.2% increase the previous month. This turnaround was mainly attributable to the year-over-year decline in gasoline prices. The purchase of passenger vehicles index was up 5.0% on a year-over-year basis in February, its largest gain since September 2010.

The clothing and footwear index was down 1.3% in the 12 months to February, after posting a 0.3% decrease in January. This larger year-over-year decline was mainly attributable to the women’s clothing index, which was down more in the 12 months to February (-2.9%) than in January (-0.8%). At the same time, consumers paid more for jewellery in February compared with the same month a year earlier.

12-month change in provinces

In all provinces, consumer prices rose less on a year-over-year basis in February than in January. Canada-wide, this deceleration was led by the gasoline index. New Brunswick posted the largest year-over-year gain in consumer prices.

The CPI in New Brunswick increased 1.8% in the 12 months to February, after rising 2.4% the previous month. Prices of cigarettes were up 7.4% on a year-over-year basis, partly because of an increase in the province’s tobacco tax, which took effect in February. The traveller accommodation index was up 7.6% on a year-over-year basis in February, its largest gain since October 2008. In contrast, fuel oil prices were down 21.5% in the 12 months to February.

In Alberta, the CPI rose 1.4% on a year-over-year basis in February, after posting a 2.1% gain in January. The rent index (-0.1%) recorded its first year-over-year decrease since May 2011. The natural gas index was up 7.1% in the 12 months to February, after declining 12.7% the previous month.

Manitoba’s CPI was up 1.1% year over year in February, following a 2.1% increase the previous month. This deceleration was partly attributable to the fresh vegetables index, which rose less in the 12 months to February (+5.5%) than in January (+20.7%). The fresh fruit index also contributed to the deceleration in consumer prices in the province, declining 0.1% on a year-over-year basis in February, after rising 7.1% the previous month.

Seasonally adjusted monthly Consumer Price Index decreases

On a seasonally adjusted monthly basis, the CPI decreased 0.2% in February, following a 0.2% increase in January.

In February, four of the eight major components increased on a seasonally adjusted monthly basis and two decreased. The health and personal care index, and the recreation, education and reading index posted no change.

On a seasonally adjusted monthly basis, the household operations, furnishings and equipment index (+0.2%) increased, while the transportation index (-1.1%) posted the largest decline.

Bank of Canada’s core index

The Bank of Canada’s core index increased 1.9% in the 12 months to February, after rising 2.0% in January.

The seasonally adjusted core index was up 0.1% on a monthly basis in February, after posting a 0.2% increase in January.

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Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments.
He has a deep understanding of market fundamentals and the impact of global events on capital markets.
He is respected among professional traders for his skilled analysis and career history as global head
of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean
has played an instrumental role in driving awareness of the forex market as an emerging asset class
for retail investors, as well as providing expert counsel to a number of internal teams on how to best
serve clients and industry stakeholders.

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